Why is the Coronavirus from China Pushing Copper Price Lower?
Copper price is set for its fourth-straight day of decline as fears about the coronavirus from China continued to weigh down the metal. XCUUSD is down 0.22% today, trading at $2.7118.
According to recent reports, the coronavirus which is said to have originated in Wuhan, China, has already infected 800 people. The death toll is also up from 3 during the weekend, to 19 people yesterday, to 25 today. In response, the government has limited people from 9 cities from travelling. This is in an effort to curb the spread of the disease during the Chinese New Year when people are expected to move a lot more.
XCUUSD has been heavily dragged down by fears of the coronavirus. Unlike gold and silver, it does not share a safe haven status. Rather than a store of value, it is mostly used in wiring and motors. Consequently, it is expected that the outbreak would weigh down industrial activity in China. Remember that China is the world’s largest metal consumer. Any slowdown would also mean dampened demand for the metal.
Copper price saw some bit of support in today’s trading after the World Health Organization (WHO) announced that the recent outbreak does not qualify as a global emergency, just yet. This suggests that the coronavirus is not as deadly as SARS was in 2003. Or at least, not yet.
On the hourly time frame, we can see that XCUUSD found some support around the $0.2700 handle. Copper price has now bounced to test support at the falling trend line from connecting the highs of January 21, January 22, and January 23. This area, around $2.7135, also coincides with the 23.6% Fib level when you draw the Fibonacci retracement tool from yesterday’s high to its intraday low. Reversal candles around this level may indicate that copper price may soon resume its slide. The next floor could be around $2.6020 where it bottomed on December 3. However, if there are still enough buyers in the market, a bullish close above the trend line could push copper price higher to $2.7800. This price offers a confluence of resistance from the 100 SMA and the falling trend line (from connecting the highs of January 16, January 17, and January 20).